NEWARK, N.J., Oct. 27 /PRNewswire-FirstCall/ -- Public Service
Enterprise Group (PSEG) today reported third quarter 2010 net
income and income from continuing operations of $567 million or $1.12 per share as compared to $488 million or $0.96 per share for the third quarter of 2009.
Operating earnings for the third quarter of 2010 were
$538 million or $1.06 per share compared to the third quarter of
2009 operating earnings of $464
million or $0.92 per
share.
PSEG believes that the non-GAAP financial measure of "Operating
Earnings" provides a consistent and comparable measure of
performance of its businesses to help shareholders understand
performance trends. Operating Earnings exclude the impact of
returns/(losses) associated with Nuclear Decommissioning Trust
(NDT), certain Mark-to-Market (MTM) accounting and other material
one time items. The table below provides a reconciliation of
PSEG's Net Income to Operating Earnings (a non-GAAP measure) for
the third quarter. See Attachment 12 for a complete list of
items excluded from Income from Continuing Operations in the
determination of Operating Earnings.
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PSEG
CONSOLIDATED EARNINGS (unaudited)
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Third
Quarter Comparative Results
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2010 and
2009
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Income
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Diluted
Earnings
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($millions)
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Per
Share
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2010
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2009
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2010
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2009
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Net Income/Income from
Continuing Ops
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$567
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$488
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$1.12
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$0.96
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Less: Excluded
Items
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29
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24
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0.06
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0.04
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Operating Earnings
(Non-GAAP)
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$538
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$464
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$1.06
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$0.92
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Avg.
Shares
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507M
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507M
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"Our financial results in the third quarter were strong," said
Ralph Izzo, chairman, president and
chief executive officer of PSEG. "Warmer than normal weather
and higher electric delivery rates in effect at the start of the
summer helped to offset the impact of a slow economic recovery and
lower realized energy prices at Power. Our results for the
quarter continue to support full year earnings of $3.00-$3.25 per share."
Operating Earnings guidance by company for the full year is as
follows:
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Operating
Earnings
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2010E
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2009A
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PSEG Power
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$1,060-$1,135
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$1,205
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PSE&G
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$425 -
$455
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$321
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PSEG Energy Holdings
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$30 -
$40
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$43
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Parent
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$5 -
$15
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$10
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Total
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$1,520 -
$1,645
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$1,579
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Earnings Per Share
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$3.00 -
$3.25
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$3.12
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Izzo indicated that the strong results "reflect the substantial
efforts of our employees to reduce costs in the face of continuing
decreases in energy prices. These efforts will play an
important role in meeting our financial objectives as legacy hedges
executed at higher prices roll off in 2011 and 2012."
Operating Earnings Review and Outlook by Operating
Subsidiary
See Attachment 6 for detail regarding the quarter-over-quarter
reconciliations for each of PSEG's businesses.
PSEG Power
PSEG Power reported operating earnings of $355 million ($0.70
per share) for the third quarter of 2010 compared with operating
earnings of $358 million
($0.71 per share) for the third
quarter of 2009.
PSEG Power's results in the third quarter benefited from a 10%
increase in output. The increase in output was experienced by PSEG
Power's fossil fleet, and improved earnings by $0.04 per share. This improvement was partially
offset by a 17-day unplanned outage at the Salem 1 nuclear reactor early in the quarter.
The lower nuclear output reduced earnings by $0.03 per share. Warmer than normal weather
during the quarter added $0.03 per
share to earnings. The recontracting of expiring hedges at
lower prices reduced earnings by $0.05 per share including customer migration away
from the BGS contract which reduced earnings in the quarter by
$0.01 per share. In addition,
the continued erosion in margin on certain wholesale electric
energy supply contracts that Power supplies from the market reduced
earnings by $0.02 per share.
Realized gains on investments in Power's Rabbi Trust Fund
added $0.01 per share to earnings.
A decline in the effective tax rate aided earnings by
$0.01 per share.
The nuclear generating units operated by PSEG Power performed at
an average capacity factor of 90.4% during the quarter resulting in
a capacity factor of 91.8% for the nine months ended September 30, 2010. The results for the
quarter include the effect of the unplanned outage at Salem 1. The outage is expected to
reduce the full-year capacity factor for Power's fleet by 0.6% to
slightly better than 91%. The anticipated results for the
full-year reflect the impact of a scheduled refueling outage at
Hope Creek that began on October
15.
Power's operating earnings for 2010 are forecasted at
$1,060 - $1,135 million compared to
operating earnings for 2009 of $1,205
million. Full year operating earnings will be affected
by continued lower forward energy pricing.
Power's full year earnings comparisons will be affected by
erosion in margins from BGS customer migration as well as volume
declines associated with other full requirement contracts.
Our forecast for full-year 2010 assumes a year-over-year
reduction in margin associated with customer migration of
$0.04 per share, at the upper end of
our prior guidance of a $0.02 - $0.04
per share impact for the year. New retail suppliers have
entered the market for residential customers in the third
quarter.
These items will be partially offset by an expected increase in
generation volume, a decline in depreciation expense and continued
focus on O&M. In addition, Power's full year earnings will
reflect the impact of a one-time increase in taxes related to the
enactment of health care legislation recognized in March 2010 along with the impairment of
sulfur-dioxide emissions allowances recognized in the second
quarter.
Power continues to hedge its expected generation in future years
consistent with past practice. At the end of September,
approximately 68% of Power's anticipated 2011 coal and nuclear
generation is hedged at an average price of $71 per MWh with hedges. This compares with
an average hedge price for energy in 2010 of $72 per MWh. These figures, however, don't
reflect the potential impact of increased levels of customer
migration, which could reduce the level of power supplied under
existing BGS contracts. Incremental migration equal to 5% of
customer load would reduce earnings by approximately $0.015 per share at current market prices.
An additional loss of 15% of load would reduce our average
hedged price in 2011 to $67 per
MWh.
PSE&G
PSE&G reported operating earnings of $155 million ($0.30
per share) for the third quarter of 2010 compared with operating
earnings of $87 million ($0.17 per share) for the third quarter of
2009.
PSE&G's results were driven by higher rates, abnormally warm
weather and a reduction in operating and maintenance expenses.
An annual increase in electric and gas rates of $73.5 million and $26.5
million that went into effect on June
7 and July 9 respectively
added $0.05 per share to earnings.
An increase in revenue associated with investments in capital
infrastructure and renewables approved during 2009 improved
earnings by $0.01 per share.
Warmer than normal weather during the third quarter of 2010
in comparison to cooler than normal weather conditions in the year
ago period improved electric demand and earnings by $0.03 per share. An increase in
transmission revenues at the start of the year added $0.01 per share to quarterly earnings. A
decline in operating and maintenance expenses during the quarter
improved earnings by $0.02 per share.
These items offset an increase in depreciation and interest
expense associated with higher levels of capital investment
($0.02 per share). Realized
gains on investments in PSE&G's Rabbi Trust added $0.02 per share, and a decline in the effective
tax rate added $0.01 per share to
earnings.
PSE&G experienced an increase in demand from residential and
commercial customers during the third quarter reflecting the
favorable weather that more than offset the impact of a weak
economy on demand. Economic data related to employment and
housing in PSE&G's service territory show signs of stability
but, don't yet indicate a return to growth in the economy.
PSE&G's operating earnings for 2010 are forecast at
$425 - $455 million compared to
2009's operating earnings of $321
million. Operating earnings will be influenced by a
full year of return on capital projects approved by the BPU in
2009, the increase in electric and gas distribution rates, an
increase in transmission revenue and a decline in operating and
maintenance expenses.
PSE&G has updated its forecast of capital spending for
2010-2012, and provided an initial forecast related to capital
spending plans for 2013. The revised budget calls for
spending $4.5 billion over 2010-2012
with spending of $1.6 billion for
2013 resulting in a $6.1 billion
capital program over this four year period. The projections
take into account the delay associated with the in-service date for
the Susquehanna to Roseland
transmission line, the reconfiguration of the Branchburg-Roseland-Hudson line as well as the previously
announced reduction in distribution spending. Transmission
related capital spending represents 50% of PSE&G's forecast
level of capital spending over 2010-2013. The implementation
and timing of capital expenditures are subject to obtaining timely
government approvals.
PSEG Energy Holdings
PSEG Energy Holdings reported operating earnings of $24 million ($0.05
per share) for the third quarter of 2010 versus an operating loss
of $1 million during the third
quarter of 2009.
The improvement in operating earnings for the quarter reflects
the successful termination of two Lilo/Silo leveraged leases during
the quarter that resulted in a gain of $0.03 per share which matched a similar level of
termination related gains recorded in the year ago quarter.
Results also benefited from the absence of a premium paid on
the debt exchange with Power in 2009 ($0.04 per share) as well as a decline in interest
expense ($0.01 per share).
The successful termination of two cross-border leases during the
quarter reduced Holdings' net cash exposure to $330 million at the end of September.
Holdings has $320 million on
deposit with the IRS to defray potential interest costs associated
with this disputed tax matter.
Holdings' operating earnings for 2010 are forecast at
$30 - $40 million as compared to
2009's operating earnings of $43
million. The loss of income on terminated leases, the
absence of the debt exchange this year and a reduction in gains
from the termination of leases will be partially offset by lower
financing costs and tax benefits from the start-up of solar
projects in Ohio and Florida.
Other Items
PSEG Power indicated during the quarter that it is exploring the
potential sale of its two 1,000 MW combined cycle generating
facilities in Texas through an
auction process. The sale is dependent on the receipt of
offers that reflect the appropriate value for the assets.
Holdings issued a call notice in October for the redemption in
December 2010 of the remaining
$127 million outstanding principal
balance of its 8.5% Senior Notes due June
2011.
FORWARD-LOOKING STATEMENT
Readers are cautioned that statements contained in this
presentation about our and our subsidiaries' future performance,
including future revenues, earnings, strategies, prospects,
consequences and all other statements that are not purely
historical, are forward-looking statements for purposes of the safe
harbor provisions under The Private Securities Litigation Reform
Act of 1995. When used herein, the words "anticipate",
"intend", "estimate", "believe", "expect", "plan", "should",
"hypothetical", "potential", "forecast", "project", variations of
such words and similar expressions are intended to identify
forward-looking statements. Although we believe that our
expectations are based on reasonable assumptions, they are subject
to risks and uncertainties and we can give no assurance they will
be achieved. The results or developments projected or
predicted in these statements may differ materially from what may
actually occur. Factors which could cause results or events
to differ from current expectations include, but are not limited
to:
- Adverse changes in energy industry law, policies and
regulation, including market structures, transmission planning and
cost allocation rules, including rules regarding who is permitted
to build transmission going forward, and reliability
standards.
- Any inability of our transmission and distribution businesses
to obtain adequate and timely rate relief and regulatory approvals
from federal and state regulators.
- Changes in federal and state environmental regulations that
could increase our costs or limit operations of our generating
units.
- Changes in nuclear regulation and/or developments in the
nuclear power industry generally that could limit operations of our
nuclear generating units.
- Actions or activities at one of our nuclear units located on a
multi-unit site that might adversely affect our ability to continue
to operate that unit or other units located at the same site.
- Any inability to balance our energy obligations, available
supply and trading risks.
- Any deterioration in our credit quality.
- Availability of capital and credit at commercially reasonable
terms and conditions and our ability to meet cash needs.
- Any inability to realize anticipated tax benefits or retain tax
credits.
- Changes in the cost of, or interruption in the supply of, fuel
and other commodities necessary to the operation of our generating
units.
- Delays in receipt of necessary permits and approvals for our
construction and development activities,
- Delays or unforeseen cost escalations in our construction and
development activities.
- Adverse changes in the demand for or price of the capacity and
energy that we sell into wholesale electricity markets.
- Increase in competition in energy markets in which we
compete.
- Adverse performance of our decommissioning and defined benefit
plan trust fund investments and changes in discount rates and
funding requirements.
- Changes in technology and customer usage patterns.
For further information, please refer to our Annual Report on
Form 10-K, including Item 1A. Risk Factors, and subsequent reports
on Form 10-Q and Form 8-K filed with the Securities and Exchange
Commission. These documents address in further detail our
business, industry issues and other factors that could cause actual
results to differ materially from those indicated in this
presentation. In addition, any forward-looking
statements included herein represent our estimates only as of today
and should not be relied upon as representing our estimates as of
any subsequent date. While we may elect to update
forward-looking statements from time to time, we specifically
disclaim any obligation to do so, even if our internal estimates
change, unless otherwise required by applicable securities
laws.
The following attachments can be found on www.pseg.com:
Attachment 1 - Operating Earnings and Per Share Results by
Subsidiary
Attachment 2 - Consolidating Statements of Operations
Attachment 3 - Consolidating Statements of Operations
Attachment 4 - Capitalization Schedule
Attachment 5 - Condensed Consolidated Statements of Cash
Flows
Attachment 6 - Quarter-over-Quarter EPS
Reconciliation
Attachment 7 - Year-over-Year EPS Reconciliation
Attachment 8 - Generation Measures
Attachment 9 - Retail Sales and Revenues
Attachment 10 - Retail Sales and Revenues
Attachment 11 - Statistical Measures
Attachment 12 - Reconciling Items Excluded from Continuing
Operations to Compute Operating Earnings
Public Service Enterprise Group (NYSE: PEG) is a publicly
traded diversified energy company with annual revenues of more than
$12 billion, and three principal
subsidiaries: PSEG Power, Public Service Electric and Gas Company
(PSE&G) and PSEG Energy Holdings.
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SOURCE Public Service Enterprise Group (PSEG)
Copyright . 27 PR Newswire